Builders Confidence & Housing Market Continues to Rise

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The Housing Market Index edged up 1 point to 41 in October, reaching the highest level for the index since June 2006, according to a statement released today by the National Association of Home Builders, or NAHB, a Washington-DC trade association.

October marks the eighth consecutive month of rising builder confidence, according to the NAHB, but the index remains below the 50-point mark, which indicates an equal number of builders view sales conditions as good as opposed to poor, David Crowe, NAHB chief economist, said in a statement.

“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” Crowe said.

The Housing Market index tracks builders’ perceptions of current single-family home sales and expectations for sales in the next six months. Builders are also asked to rate traffic of prospective buyers.  Builders’ perceptions of current and near-term sales expectations remained unchanged from September, but their perception of buyer traffic increased 5 points to 35, the highest level since April 2006, the NAHB said.

Builders continue to express concerns over tight credit conditions impacting both borrowers and builders, according to Eye on Housing, an NAHB blog. Appraisals below the contracted price are also a concern, according to the blog, and builders feel squeezed by rising costs in a time of small increases in home prices. Rising costs are attributed to a decline in buildable lots and higher prices for some building materials. The uncertainty surrounding federal taxes and spending is also weighing on builders’ confidence, according to the blog.

In other housing market news due this week, the Commerce Department is scheduled to release its September housing starts report tomorrow, and, on Friday, the National Association of Realtors will report on existing home sales for September.

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